Algoma Steel Inc. Reports Financial Results For The First Quarter Ended March 31, 2003.Business Editors SAULT STE. MARIE Sault Sainte Marie — pronounced "Soo Saint Marie" (IPA /su seɪnt məˈɹi/) — is the name of two cities on the Saint Marys River, which forms part of the boundary between the United States and Canada. , Ontario--(BUSINESS WIRE)--April 30, 2003 Algoma Steel ''See also Algoma (Disambiguation) Algoma Steel Corporation (TSX: AGA) was founded in 1902 by Francis Clergue, an American entrepreneur who had settled in Sault Ste. Marie, Ontario. Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :AGA) today reported net income of $12.5 million for the three months ended March 31, 2003 (basic earnings per share of $0.52 per common share or $0.41 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share). This compares to a net loss of $30.5 million for the three months ended March 31, 2002. Denis Denis, king of Portugal: see Diniz. Turcotte Turcotte or Turcott is a surname, and may refer to:
See also: Spite the positive net income for the quarter, we are disappointed with the results on an operating basis. Declining selling prices and increasing energy costs resulted in a first quarter loss on an operating basis of $5.4 million before the foreign exchange gain of $13.6 million and the recognition of a $4.3 million electric power rebate rebate, partial refund of the total price paid for goods or services. In the United States, rebates were historically given by railroads to favored shippers as a return on transportation charges. . We are concerned with the sluggish North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. economy and the resulting impact on demand for steel. Prices were off significantly from the fourth quarter and, given market momentum and recent competitive actions, we expect the next quarter to be challenging. In anticipation of further price weakness, cost reduction initiatives already underway have been accelerated and production levels reduced by 10%." Sales in the first quarter 2003 increased 24% to $299 million compared with $242 million in the same quarter of 2002. Steel shipments of 565,000 tons were up 4% over 544,000 tons for the first quarter of 2002. Average revenue per ton of $529 was $84 per ton or 19% higher than the first quarter of 2002. Cost per shipped ton was $469 for the first quarter 2003, up $55 per ton from the first quarter 2002 due to higher energy and labour costs, offset in part by improved yields and higher production volumes. Sales in the first quarter 2003 increased by 10% to $299 million from $273 million in the fourth quarter 2002. Steel shipments increased 101,000 tons or 22% from 464,000 tons in the fourth quarter 2002. Fourth quarter shipments were negatively affected by seasonal factors and the October October: see month. maintenance of the No. 7 Blast Furnace blast furnace, structure used chiefly in smelting. The principle involved in this means of extracting metals is that of the reduction of the ores by the action of carbon monoxide, i.e., the removal of oxygen from the metal oxide in order to obtain the metal. . Average revenue per ton of $529 decreased by $60 per ton compared to fourth quarter 2002 revenue per ton of $589 due to lower selling prices and non-steel sales. Cost per shipped ton of $469 was down 11% from $529 per ton in the fourth quarter 2002 as a result of higher volumes and the effect of the October maintenance shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down and year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. adjustments on the fourth quarter 2002. Financial highlights for first quarter 2003 compared to previous quarters:
2003 2002
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Feb./
Q1 Q4 Q3 Q2 Mar. Jan.
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($ millions except per share data)
Sales $298.8 $273.2 $312.7 $287.2 $158.3 $83.6
EBITDA (1) $21.8 $17.9 $61.5 $36.5 $12.6 $(4.7)
Operating Income
(Loss) $7.3 $5.2 $46.7 $21.5 $3.0 $(10.5)
Income (Loss)
Before Taxes $13.1 $(2.8) $29.2 $22.2 $(4.0) $(25.9)
Net Income (Loss) $12.5 $(3.3) $28.6 $21.6 $(4.4) $(26.1)
Net Income (Loss)
Per Share:
- Basic $0.52 $(0.14) $1.20 $1.03 $(0.23) $(0.49)
- Diluted $0.41 $(0.14) $0.96 $0.72 $(0.23) $(0.49)
Basic weighted
average number of
common shares
outstanding
(millions) 23.91 23.89 23.74 20.79 19.19 53.65
Revenue Per
Ton Shipped $529 $589 $566 $499 $452 $431
EBITDA Per Ton
Shipped (1) $39 $39 $111 $63 $36 $(24)
Steel Shipments (000's of net tons)
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2003 2002
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Mar.
Q1 Q4 Q3 Q2 Feb./ Jan.
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Sheet 468 396 464 496 296 167
Plate 97 68 88 80 54 27
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Total 565 464 552 576 350 194
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(1) Earnings before interest, taxes, depreciation and amortization
and foreign exchange. This earnings measure is not a recognized
measure for financial statement presentation under Canadian
generally accepted accounting principles (GAAP). Non-GAAP earnings
measures (such as EBITDA) do not have any standardized meaning and
therefore may not be comparable to similar measures presented by
other companies. This earnings measure is provided to assist users
in analyzing operating profitability before non-operating expenses
and non-cash charges.
For further details, please see the Financial Statements and Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial below. MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion and analysis should be read in conjunction with Management's Discussion and Analysis section of the Company's 2002 Annual Report and the interim financial statements and notes contained in this report. This discussion of the Company's business may include forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information with respect to the Company, including its business and operations and strategies, as well as financial performance and conditions. The use of forward-looking words such as, "may," "will," "expect" or similar variations generally identify such statements. Although management believes that expectations reflected in forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. are reasonable, such statements involve risks and uncertainties including the factors discussed in the Management's Discussion and Analysis section of the Company's 2002 Annual Report. Financial and Operating Results Net income for the three months ended March 31, 2003 was $12.5 million, a significant improvement over the net loss of $30.5 million incurred for the three months ended March 31, 2002. The quarter over quarter improvement primarily results from higher selling prices, lower interest expense, a $13.6 million foreign exchange gain due to the strengthening Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents and the recognition of a $4.3 million electric power rebate attributable to the period May 2002 to January January: see month. 2003. Revenue was $298.8 million for the three months ended March 31, 2003 based on average revenue per ton of $529 compared with revenue of $241.9 million and average revenue per ton of $445 for the three months ended March 31, 2002. The revenue per ton improvement is due to industry price increases in 2002. The higher revenue also results from a 4% increase in steel shipments with shipments of 565,000 tons for the three months ended March 31, 2003 compared to 544,000 tons for the three months ended March 31, 2002. Cost of sales increased to $265.2 million for the three months ended March 31, 2003 from $225.4 million for the three months ended March 31, 2002 due to higher shipments and operating costs operating costs npl → gastos mpl operacionales . Unit operating costs were higher in the quarter at $469 per ton versus $414 per ton in the first quarter 2002 due to higher energy and labour costs. First quarter 2003 EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become of $21.8 million improved by $13.9 million over the first quarter of 2002 primarily as a result of higher average revenue per ton offset by an increase in unit operating costs and administrative and selling expenses. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the three months ended March 31, 2003 was $7.3 million, an improvement of $14.8 million over the $7.5 million operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. reported for the three months ended March 31, 2002. Financial income for the three months ended March 31, 2003 was $5.8 million compared to a financial expense of $12.3 million for the three months ended March 31, 2002. A stronger Canadian dollar in the first quarter of 2003 resulted in a foreign exchange gain of $13.6 million versus a foreign exchange gain of $1.4 million in the first quarter of 2002. Interest expense totaled $7.8 million in the first quarter of 2003 versus $13.7 million in the first quarter of 2002 due to higher pre-restructuring interest expense in the month of January 2002. Financial Resources and Liquidity Cash provided by operating activities was $42.0 million for the three months ended March 31, 2003 that includes $23.0 million from a reduction in operating working capital. The significant components of the change in operating working capital included a decline in inventories of $33.7 million in the quarter, primarily raw materials, offset by a $15.0 million and $8.3 million increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and prepaid expenses Prepaid Expense An asset that arises on a balance sheet because of the payment of something in advance (prepayment). Services for the payment will be received in the near future. , respectively. An increase of $10.4 million in accounts payable also contributed to the reduction in operating working capital. Capital expenditures for the three months ended March 31, 2003 of $6.2 million compared to expenditures of $3.2 million for the three months ended March 31, 2002. Financing activities for the three months ended March 31, 2003 included a scheduled $10 million repayment of the term loan. Borrowings under the bank facility decreased $25.8 million for the three months ended March 31, 2003 due primarily to the reduction in working capital. Unused availability under the revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility at March 31, 2003 was $58 million compared to $68 million of unused availability at December December: see month. 31, 2002. The revolving credit facility matures on December 30, 2003 and provides financing equal to the lesser of $180 million and a borrowing base determined by the agreement. TRADE The Government of Canada The Government of Canada is the federal government of Canada. The powers and structure of the federal government are set out in the Constitution of Canada. In modern Canadian use, the term "government" (or "federal government") refers broadly to the cabinet of the day and has not yet announced the implementation of a remedy relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. Steel Safeguard investigation. The Canadian International Trade Tribunal The Canadian International Trade Tribunal is an independent quasi-judicial group operating in Canada's trade remedy system. The administrative tribunal, which considers cases of dumping and subsidizing, reports to Parliament through the Minister of Finance. (CITT CITT Canadian International Trade Tribunal CITT Citizens’ Independent Transportation Trust CITT Canadian Institute for Theatre Technology (Canadian equivalent of USITT) CITT Canadian Institute of Traffic and Transportation ) in mid-August Noun 1. mid-August - the middle part of August period, period of time, time period - an amount of time; "a time period of 30 years"; "hastened the period of time of his recovery"; "Picasso's blue period" 2002 announced its remedy recommendations relating to five products that were earlier found to be injuring the Canadian industry. Tariff Rate Quotas were recommended for two of the product categories (discrete plate and cold rolled sheet) produced by Algoma Algoma may refer to:
The Company is carefully monitoring the volume and pricing of imports within its product range. Trade remedy action will be taken against unfairly traded imports. ORGANIZATIONAL CHANGES Glen Manchester Manchester, city, England Manchester (măn`chəstər, –chĕs'tər), city and metropolitan district (1991 pop. 397,400), NW England, on the Irwell, Medlock, Irk, and Tib rivers. is appointed Vice President Finance and Chief Financial Officer effective May 1, 2003. Keith Keith may refer to: People with the given name Keith:
OUTLOOK Increased steel production in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , combined with continuing high import levels, has resulted in excess inventories and has exerted downward pressure on spot prices. This, in conjunction with weaker automotive market conditions, is expected to result in a difficult second quarter. This news release contains forward-looking information with respect to Algoma's operations and future financial results. Actual results may differ from expected results for a variety of reasons including the factors discussed in the Management's Discussion and Analysis section of Algoma's 2002 Annual Report.
Algoma Steel Inc.
Consolidated Statements of Income (Loss)
and Retained Earnings (Deficit) (Unaudited)
(millions of Canadian dollars - except per share amounts)
Three months Two months One month
ended ended ended
March 31 March 31 January 31
2003 2002 2002
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Pre-reorganization
(Notes 1,2)
Sales $ 298.8 $ 158.3 $ 83.6
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Operating expenses
Cost of sales 265.2 140.2 85.2
Administrative and
selling 11.8 5.5 3.1
Depreciation and
amortization 14.5 9.6 5.8
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291.5 155.3 94.1
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Income (loss) from
operations 7.3 3.0 (10.5)
Financial expense
(income)
Interest on long-term
debt (note 4) 5.3 3.8 -
Foreign exchange loss
(gain) (13.6) 0.9 (2.3)
Other interest 2.5 2.3 7.6
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(5.8) 7.0 5.3
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Income (loss) before the
following 13.1 (4.0) (15.8)
Loss on disposal of joint
venture interest (note 7) - - (6.8)
Reorganization expenses - - (3.3)
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Income (loss) before
income taxes 13.1 (4.0) (25.9)
Provision for income
taxes - current (note 9) 0.6 0.4 0.2
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Net income (loss) $ 12.5 $ (4.4) $ (26.1)
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Net income (loss) per
common share (note 6)
Basic $ 0.52 $ (0.23) $ (0.49)
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Diluted $ 0.41 $ (0.23) $ (0.49)
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Weighted average number
of common shares
outstanding - millions
(note 6)
Basic 23.91 19.19 53.65
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Diluted 30.10 30.00 53.65
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Retained earnings (deficit)
Balance, beginning of
period $ 41.9 $ - $ (264.6)
Net income (loss) 12.5 (4.4) (26.1)
Accretion of equity
component of convertible
debt (0.2) (0.1) -
Fresh start adjustment
(note 1) - - 290.7
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Balance, end of period $ 54.2 $ (4.5) $ -
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SUPPLEMENTAL NON-FINANCIAL INFORMATION
Operations (thousands of
net tons)
Raw steel production 645 405 186
Steel shipments 565 350 194
See accompanying notes.
Algoma Steel Inc.
Consolidated Balance Sheets (Unaudited)
(millions of Canadian dollars)
March 31 December 31
2003 2002
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Current assets
Accounts receivable $ 169.3 $ 154.3
Inventories 237.7 271.4
Prepaid expenses 27.3 19.0
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434.3 444.7
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Capital assets, net 674.9 684.8
Deferred charges 1.7 2.3
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Total assets $ 1,110.9 $ 1,131.8
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Current liabilities
Bank indebtedness (note 3) $ 73.0 $ 98.8
Accounts payable and accrued liabilities 83.8 77.1
Accrued interest on long-term debt
(note 4(a)) 23.7 20.0
Income and other taxes payable 6.9 4.7
Accrued pension liability and
post-employment benefit obligation 28.7 28.7
Current portion of term loan (note 3) 19.0 29.0
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235.1 258.3
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Long-term debt (note 4) 186.8 200.6
Accrued pension liability and
post-employment benefit obligation 312.4 311.2
Other long-term liabilities 19.2 16.8
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518.4 528.6
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Shareholders' equity
Capital stock (notes 5 & 6) 214.2 214.1
Convertible long-term debt (note 4) 19.4 19.3
Shareholders' surplus on reorganization
(note 1) 69.6 69.6
Retained earnings 54.2 41.9
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357.4 344.9
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Total liabilities and shareholders'
equity $ 1,110.9 $ 1,131.8
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See accompanying notes.
Algoma Steel Inc.
Consolidated Statements of Cash Flows (Unaudited)
(millions of Canadian dollars)
Three months Two months One months
ended ended ended
March 31 March 31 January 31
2003 2002 2002
Pre-reorg-
anization
(Notes 1,2)
Cash provided by (used in)
Operating activities
Net income (loss) $ 12.5 $ (4.4) $ (26.1)
Adjust for items not affecting
cash:
Depreciation and amortization 14.5 9.6 5.8
Exchange loss (gain) on long-term
debt (14.0) 0.9 (1.9)
Loss on disposal of joint venture
interest (note 7) - - 6.8
Other 6.0 3.6 (2.6)
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19.0 9.7 (18.0)
Changes in operating working
capital 23.0 (16.3) 49.0
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42.0 (6.6) 31.0
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Investing activities
Capital asset expenditures (6.2) (1.9) (1.3)
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Financing activities
Proceeds (repayment) of term loan
(note 3) (10.0) - 50.0
Increase (decrease) in bank
indebtedness (25.8) 8.5 (79.7)
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(35.8) 8.5 (29.7)
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Cash
Change during the period - - -
Balance, beginning of period - - -
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Balance, end of period $ - $ - $ -
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Algoma Steel Inc. Notes to Interim Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge (Unaudited) (millions of Canadian dollars) 1. Financial reorganization As a result of a financial reorganization on January 29, 2002, the Corporation's assets and liabilities were comprehensively revalued using the principles of fresh start accounting as required under Canadian generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). For accounting purposes the Corporation has used an effective date of January 31, 2002. Under fresh start accounting, all assets and liabilities were revalued at estimated fair values. In order to establish the fresh start balance sheet, an equity value of $300 million was calculated based on the net present value of estimated future free cash flows reduced by bank indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. , long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and pension and post-employment obligations. The Corporation's previous Board of Directors passed a resolution setting the stated capital stated capital See legal capital. of the new common shares issued under the reorganization at $10 per share based upon the calculated equity value. The book values of the assets and liabilities at January 31, 2002 approximated their fair values, with the exception of capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) and the pension and post-employment benefit obligations. The fair values of the pension and post-employment obligations were determined by an independent actuary actuary One who calculates insurance risks and premiums. Actuaries compute the probability of the occurrence of such events as birth, marriage, illness, accidents, and death. . The fair value of the capital assets was calculated as the excess of the equity value and liabilities over the fair value of the remaining assets. The revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. adjustment of $441.4 million and the $290.7 million deficit were classified as shareholders' surplus on reorganization, resulting in a net increase of $150.7 million. 2. Basis of presentation and accounting policies The unaudited interim consolidated financial statements ("interim financial statements") have been prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian GAAP on a basis consistent with the accounting policies disclosed in the fiscal 2002 Annual Report. Effective January 1, 2002, the Corporation retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted the new recommendations of the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. ("CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) ") with respect to foreign currency translation. The new recommendations eliminated the deferral deferral - Waiting for quiet on the Ethernet. and amortization of unrealized translation gains and losses on foreign currency denominated long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. monetary assets and liabilities Monetary assets and liabilities Assets and liabilities with contractual payoffs. and require separate disclosure of exchange gains and losses included in the determination of net income. Effective January 1, 2002, the Corporation also adopted the recommendations of the CICA relating to stock-based compensation and other stock-based payments. The new recommendations are generally applicable only to awards granted after the date of adoption. The adoption of these new recommendations did not have a material impact on the interim financial statements. Management is required to make estimates and assumptions that affect the amounts reported in the interim financial statements. Management believes that the estimates are reasonable, however, actual results could differ from these estimates. The interim financial statements do not conform in all respects to the requirements of Canadian GAAP for annual consolidated financial statements. The interim financial statements have been prepared on a "going concern" basis that assumes the Corporation will continue in operation for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future and will be able to realize its assets and discharge its liabilities in the normal course of business. These interim financial statements do not reflect any adjustments that would be necessary if the "going concern" assumption was not appropriate. The Corporation is dependent upon a strong North American steel market, improving financial results and the refinancing Refinancing An extension and/or increase in amount of existing debt. of its banking facilities in December 2003. The outcome of these matters is not determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. at this time. Comparative financial information for the month of January 2002 is required under securities legislation and may be of limited interest to readers of these interim financial statements. In reviewing the comparative information readers are reminded that the information does not reflect the effects of the financial reorganization or the application of fresh start accounting. Certain items in the December 31, 2002 consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the presentation adopted in the current period. Algoma Steel Inc. Notes to Interim Consolidated Financial Statements (Unaudited) (millions of Canadian dollars) 3. Banking facilities On January 29, 2002, the Corporation entered into an Amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and Restated Loan Agreement ("Agreement"). The Agreement expires on December 30, 2003 and provides the Corporation with a revolving credit facility ("Revolving Facility") and a term loan ("Term Facility"). Effective December 1, 2002, certain amendments were made to the Agreement affecting pricing and availability ("Amendments"). The Revolving Facility provided financing equal to the lesser of $180 million and a borrowing base determined by the levels of the Corporation's accounts receivable, inventories and a loan guarantee provided by the Government of Canada ("Loan Guarantee"), less certain reserves. Under the Amendments, the calculation of the borrowing base was changed by deleting the Loan Guarantee from the calculation and reducing the amount of the reserves with the size of the reserves fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. with the financial performance of the Corporation. At March 31, 2003 there was $58 million of unused excess availability under the Revolving Facility after taking into account $23 million of outstanding letters of credit (December 31, 2002 - $68 million of availability with $26 million of letters of credit). The Revolving Facility matures on December 30, 2003 and is collateralized by a first charge on accounts receivable and inventories and a second charge on the Loan Guarantee. Prior to December 1, 2002, borrowings were in either Canadian or United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (U.S) funds at 4.5% over either the Canadian or U.S. prime bank rate or, at the Corporation's option, at 5.5% over bankers' acceptance A bankers' acceptance, or BA, is a time draft drawn on and accepted by a bank. Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the rate or London interbank in·ter·bank adj. Relating to, involving, or connecting two or more banks: interbank borrowing; an interbank network of automated teller machines. offering rate (LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). ) for U.S. dollar loans. Under the Amendments the borrowing rate fluctuates between 1.75% and 2.5% over prime depending on the Corporation's financial performance. The amount owing on the Term Facility at March 31, 2003 is $19 million and is repayable in $10 million quarterly installments on June 30, 2003 and September 30, 2003. During the first quarter $10 million of the Term Facility was repaid. Amounts repaid under the Term Facility cannot be reborrowed. Prior to December 1, 2002, borrowings were in Canadian funds at 4.5% over the Canadian prime bank rate or, at the Corporation's option, at 5.5% over bankers' acceptance rate loans. Under the Amendments the borrowing rate fluctuates between 1.75% and 2.5% over prime depending on the Corporation's financial performance. The Term Facility is collateralized by a first charge on capital assets and the Loan Guarantee and a second charge on accounts receivable and inventories. 4. Long-term debt
March 31 December 31
2003 2002
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Secured 11% Notes maturing December 31, 2009
principal value U.S. $125 million (a) $ 183.5 $ 197.2
Secured 1% convertible Notes maturing
December 31, 2030
principal value U.S. $38.6 million (b) 3.3 3.4
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186.8 200.6
Less: current portion - -
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$ 186.8 $ 200.6
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(a) The 11% Notes are redeemable Redeemable Eligible for redemption under the terms of an indenture. after 2005 at a declining premium ranging from 105.5% of principal in 2006 to 101.4% in 2008. Mandatory redemptions of U.S. $12.5 million per year are required commencing December 31, 2007 with the balance payable at maturity. Interest for 2002 and the first half of 2003 will accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. and be paid on December 31, 2003. Interest for the second half of 2003 will accrue and be paid on June 30, 2004. After 2003, interest will be paid semi-annually on June 30 and December 31 of each year. Notwithstanding the foregoing, no interest will be paid unless and until the banking facilities described in note 3 are repaid or refinanced. The 11% Notes are collateralized by a first charge on capital assets, subject to collateral on the Term Facility (note 3), and a second charge on other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. . (b) The collateral and interest accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. and payment terms are the same as for the 11% Notes. The 1% Notes are convertible into common shares at the holder's option at a conversion price per share of $10 ("Conversion Price"). After December 31, 2002, the Corporation may convert all or any part of the principal amount at the Conversion Price if the average trading price Trading price The price at which a security is currently selling. of the common shares exceeds 125% of the Conversion Price for 30 consecutive trading days In Business, the trading day is the time span that a particular stock exchange is open. For example, the New York Stock Exchange is, as of 2006, open from 09:30AM to 4:00PM. Trading days never take place on weekends. , or at any time after December 31, 2009. For conversion purposes the exchange rate to be used is U.S. $1.00 = CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. $1.60. As required by Canadian GAAP, the 1% Notes are separated into debt and equity components in the consolidated balance sheets. The present value of the interest payments up to and including 2009 are presented as debt. The present value of the principal payment in 2030 and interest for the period 2010 through 2030 plus the value ascribed to the holder conversion option are presented as equity. All present value amounts were determined using an 11% discount rate. Algoma Steel Inc. Notes to Interim Consolidated Financial Statements (Unaudited) (millions of Canadian dollars) 5. Share capital Authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: - Unlimited common shares
The following table summarizes the share capital transactions since
January 31, 2002 in millions of shares and dollars:
Common Shares
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Issued and
Stock Options To Be Issued Outstanding
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Ascribed Stated Stated
#Options Value #Shares Capital #Shares Capital
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Balance at January
31, 2002 4.0 $ 40.0 16.0 $ 160.0 - $ -
Issued pursuant to
Plan of Arrangement to:
First Mortgage Note
holders (15.0) (150.0) 15.0 150.0
Unsecured creditors (1.0) (10.0) 1.0 10.0
Stock options
exercised by
employees (4.0) (40.0) 4.0 40.0
Conversion of
long-term debt 3.8 13.7
Shares issued
as employee
compensation - 0.2
Directors' Share
Award Plan - 0.1 - 0.1
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Balance at
December 31, 2002 - $ - - $ 0.1 23.8 $ 214.0
Directors' Share
Award Plan (note 8) - - - - 0.1 0.1
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Balance at
March 31, 2003 - $ - - $ 0.1 23.9 $ 214.1
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6. Earnings per share Basic net income (loss) per common share is calculated by adjusting reported net income (loss) by the net charge to retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. related to the accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the of the equity component of the 1% convertible Notes. Diluted net income (loss) per common share assumes the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of the conversion of the 1% convertible Notes as of February 1, 2002 at the Conversion Price (note 4).
Three months Two months
ended ended
March 31 March 31
2003 2002
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Basic
Net income (loss) $ 12.5 $ (4.4)
Convertible long-term debt -
net charge to retained earnings (0.2) (0.1)
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Net income (loss)
attributable to common
shareholders $ 12.3 $ (4.5)
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Diluted
Net income (loss) $ 12.5 $ (4.4)
Convertible long-term debt -
net charge to income (0.2) 0.1
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Net income (loss)
attributable to common
shareholders $ 12.3 $ (4.3)
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Basic weighted average number of common
shares outstanding 23.91 19.19
Common shares issued on the
assumed conversion of
convertible long-term debt and
exercising of employee stock options 6.19 10.81
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Diluted weighted average number of
common shares outstanding 30.10 30.00
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In calculating the basic weighted average number of common shares outstanding, the 16 million common shares issued to the holders of the First Mortgage Notes and the unsecured creditors Unsecured Creditor An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because they have nothing to fall back on should the borrower default on the loan. A debenture holder is an unsecured creditor. were assumed to have been issued on February 1, 2002, and the 4 million shares issued to employees were included as of February 12, 2002. Algoma Steel Inc. Notes to Interim Consolidated Financial Statements (Unaudited) (millions of Canadian dollars) 7. Disposition of joint venture interest In January 2002, the Corporation's wholly-owned U.S. subsidiary, Cannelton Iron Ore Company ("CIOC CIOC Chief Information Officers Council CIOC Community Information Online Consortium CIOC Combined/Current Intelligence Operations Center CIOC Counter-Insurgency Operations Command CIOC COMBICON I/O Connector "), completed an agreement with Cleveland-Cliffs Inc. ("Cliffs") to transfer CIOC's 45% interest in the Tilden Mining Company L.C. ("Tilden") in exchange for the assumption by Cliffs of CIOC's share of Tilden's liabilities and no cash consideration. As part of this arrangement, the Corporation has entered into an exclusive 15-year supply agreement with Cliffs for a minimum annual supply of 2.5 million tons of iron ore at market prices. If the Corporation defaults under the supply agreement prior to December 31, 2008, then 50% of the liabilities assumed by Cliffs will revert re·vert v. 1. To return to a former condition, practice, subject, or belief. 2. To undergo genetic reversion. back to CIOC and the Corporation. These assumed liabilities may include contingent obligations, such as environmental costs, that are not reflected in Tilden's financial statements. 8. Stock-based compensation plan In May 2002, the shareholders of the Corporation approved a Share Award Plan (the "Plan") for members of the Board of Directors that permits the Corporation, at its option, to award common shares to eligible Directors as a portion of their compensation. Any shares granted under the Plan are issued quarterly. The Corporation accrues for this compensation based on the fair market value of the shares granted. During the first quarter, 15,328 shares were awarded with an average fair market value of $3.34 per share. 9. Income taxes The Corporation's effective income tax rate differs from its statutory manufacturing and processing rate of 33% as a result of recognizing the benefit of previously unrecorded future income tax assets such as tax loss carryforwards tax loss carryforward See carryforward. . The Corporation's income tax loss carryforwards were reduced by approximately $180 million under the financial reorganization as a result of debts being discharged for less than their principal amount. Federal and Ontario non-capital loss carryforwards Loss Carryforward An accounting technique with which a company applies net operating losses of the current year to future year's profits in order to reduce tax liability. Notes: at March 31, 2003 are estimated to be $77 million and $196 million, respectively, the benefit of which has not been recognized in the financial statements. The Corporation's estimate of non-capital loss carryforwards has not been reviewed by the Canada Customs and Revenue Agency Canada Customs and Revenue Agency was a department of the government of Canada. It split up into:
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